WEBVTT - Discovery's Multi-Platform Distribution Is Paying Off 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penl podcast. I'm Paul Swinge. You, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:23.280 at Bloomberg dot com. Well, one of my favorite media companies, 0:00:23.280 --> 0:00:27.639 Discovery Communications, reported better than expected results second quarter results. 0:00:27.760 --> 0:00:30.160 UH stock is actually up about one point two percent today, 0:00:30.200 --> 0:00:33.440 up about almost for UH the year. To help us 0:00:33.479 --> 0:00:36.600 break down the numbers four Discovery Communications and kind of 0:00:36.600 --> 0:00:39.440 the future growth drivers for the Compner's company, We're welcome. 0:00:39.840 --> 0:00:43.800 Gunner viden Fells, chief financial officer for Discovery Communications. He 0:00:43.880 --> 0:00:46.280 joins us live on our Bloomberg eleven three of studios. Gonner, 0:00:46.360 --> 0:00:48.760 thanks so much for being here and for dealing with 0:00:48.800 --> 0:00:52.280 my pronunciation. Um. First of all, just kind of just 0:00:52.360 --> 0:00:55.400 kind of breakdown kind of what what you really experienced 0:00:55.440 --> 0:00:57.280 there in a second quarter looks like against some pretty 0:00:57.280 --> 0:01:00.400 good results relative to the street expectations. Oh look, I 0:01:00.400 --> 0:01:02.520 mean bottom line is it was a great quarter. I'm 0:01:02.560 --> 0:01:05.720 really really happy with what we delivered UM, you know, 0:01:05.720 --> 0:01:08.520 because it chose two things. Number One, the core business 0:01:08.640 --> 0:01:11.440 is in much better shape than people think, and I 0:01:11.520 --> 0:01:13.880 do see a lot of longevity that might surprise some people. 0:01:14.480 --> 0:01:17.959 Number Two, we're also seeing some first you know, results 0:01:17.959 --> 0:01:20.480 coming in from our investments on the digital side, so 0:01:20.600 --> 0:01:23.039 that's been helping revenue growth. And uh you know, we 0:01:23.040 --> 0:01:25.640 we just guided to an actcelebration in in revenue growth 0:01:25.680 --> 0:01:27.440 for the next quarter. So that's that's that's a great, 0:01:27.680 --> 0:01:30.920 great result at this stage in the industry. And uh, 0:01:30.959 --> 0:01:33.520 you know, the the the bottom line is we're delivering 0:01:33.800 --> 0:01:37.720 top of industry performance, accelerating revenues, UH, peer group leading 0:01:37.760 --> 0:01:40.920 margins UM, and we're delivering on our promises. Women like 0:01:41.040 --> 0:01:43.720 to watch houses get remodeled, and they like to watch 0:01:43.760 --> 0:01:48.200 people throw down in a cooking competition. H GTV, Food Network, TLC, 0:01:48.440 --> 0:01:52.280 all of these are very commonly watched by women. Interestingly, 0:01:52.320 --> 0:01:55.520 we learned that Gunner's favorite show was The Deadliest Catch, 0:01:55.560 --> 0:01:58.360 which I love the idea of UM and we've been 0:01:58.360 --> 0:02:00.720 talking about sharks. But but moving forward, I think one 0:02:00.800 --> 0:02:03.840 big question for all media companies is distribution and whether 0:02:03.880 --> 0:02:06.840 you plan to go direct to consumer and how how 0:02:06.920 --> 0:02:10.119 you plan to to roll that kind of product out. Yeah. Look, 0:02:10.160 --> 0:02:11.760 I mean we've always said we we want to go 0:02:11.840 --> 0:02:14.880 for a maximum possible distribution, and uh, you know, over 0:02:14.919 --> 0:02:18.320 the past twelve to eighteen months, were now the most 0:02:18.360 --> 0:02:22.000 widely distributed media company across the traditional and the virtual 0:02:22.320 --> 0:02:25.480 MVPD environment. That's I mean, that's that's a major achievement 0:02:25.600 --> 0:02:27.520 over the past couple of What does that mean that 0:02:27.560 --> 0:02:30.200 you just do sling in Hulu and Netflix exactly, so 0:02:30.480 --> 0:02:34.920 you've got the broadest reach, got exclusive your cable satellite, Uh, 0:02:34.960 --> 0:02:38.440 you know, over the top, We're we're on all relevant 0:02:38.480 --> 0:02:41.440 platforms and you know, as you said, women like to 0:02:41.440 --> 0:02:44.720 watch our portfolio. Not a lot of people understand that 0:02:44.800 --> 0:02:47.400 Discovery is the number one TV company in the US 0:02:47.440 --> 0:02:50.560 across all of cable broadcasts for for female audiences. You 0:02:50.600 --> 0:02:53.280 know that that's that's a pretty powerful position. Uh. Speaks 0:02:53.320 --> 0:02:55.520 to the value of the content and um, you know 0:02:55.520 --> 0:02:58.640 that's why we also feel very well positioned. Uh you 0:02:58.639 --> 0:03:00.679 know as audiences move in to an O, T, T 0:03:00.800 --> 0:03:03.800 and directed consumer world. Uh. You know, obviously that's still 0:03:03.919 --> 0:03:06.200 early stage, but we have started deploying a lot of 0:03:06.240 --> 0:03:09.679 capital into the build out of our global director consumer platform. 0:03:10.320 --> 0:03:13.120 We've hired a team. Peter Farisee joined us from from 0:03:13.160 --> 0:03:18.160 Amazon really knowing you know, how to build those products. Well, 0:03:18.280 --> 0:03:20.560 you know, I've given guidance to about three or four 0:03:20.600 --> 0:03:23.960 hundred million negative a bit of contributions for the year. Um. 0:03:24.000 --> 0:03:25.960 You know that's you know, that's somewhere in the five 0:03:26.680 --> 0:03:29.280 range of our underlying profit. You know, it's not betting 0:03:29.280 --> 0:03:31.440 the farm, but it's material and enough to help us 0:03:31.720 --> 0:03:34.000 make a difference. And keep in mind, we're in a 0:03:34.120 --> 0:03:36.440 so much better position to roll this out. We've got 0:03:36.440 --> 0:03:38.840 this global footprint, boots on the ground and every relevant 0:03:38.920 --> 0:03:41.880 territory across the globe. We're reaching four close to four 0:03:41.960 --> 0:03:45.400 hundred million homes every day with with our products, so 0:03:45.480 --> 0:03:49.400 you know, when it comes to acquiring UH subscribers promoting 0:03:49.400 --> 0:03:52.680 these products, we're in a very very powerful starting position. 0:03:53.000 --> 0:03:54.760 So gunn are. One of the things that maybe a 0:03:54.760 --> 0:03:57.040 lot of people don't know about Discovery Communications is that 0:03:57.120 --> 0:04:00.240 outside of North America, you guys are very big in ports. 0:04:00.280 --> 0:04:04.520 You've made some very big bets Eurosport Olympics rights outside 0:04:04.560 --> 0:04:06.800 of North America, he had a big deal. I guess 0:04:06.920 --> 0:04:08.760 most recently be with the with the p g A, 0:04:09.440 --> 0:04:12.280 so you know, making a big bet on sports. But 0:04:12.320 --> 0:04:15.360 we've actually seen some investors have read that sports rights 0:04:15.600 --> 0:04:17.800 in sports viewing has kind of peaked. How do you 0:04:17.880 --> 0:04:21.320 view your investment in sports globally? Well, two things. Number one, 0:04:21.839 --> 0:04:24.480 the market is very different, uh, you know between the 0:04:24.560 --> 0:04:27.040 US and the rest of the world, because we've never 0:04:27.120 --> 0:04:30.080 had this sort of stuffing of h of sports into 0:04:30.080 --> 0:04:32.520 the mainstream you know basic bundle that we're seeing here 0:04:32.520 --> 0:04:34.280 in the U s which which is leading uh and 0:04:34.480 --> 0:04:37.120 and really driving the court cutting now uh, you know, 0:04:37.240 --> 0:04:39.520 in many international markets there's just no court to cut. 0:04:39.560 --> 0:04:41.120 And part of that, part of the reason behind that 0:04:41.200 --> 0:04:43.560 is that that in many markets sports is more of 0:04:43.560 --> 0:04:46.560 an ala carte product, so not as overpriced as as 0:04:46.560 --> 0:04:49.160 in the US. Um Number two is for US, uh, 0:04:49.240 --> 0:04:51.000 you know, we're not going after these sort of you know, 0:04:51.080 --> 0:04:54.320 top tier premium rights where you're paying up crazy inflation 0:04:54.400 --> 0:04:57.120 every three years. We're trying to go for you know, 0:04:57.240 --> 0:05:00.640 very attractive but a little more niche content, and we're 0:05:00.680 --> 0:05:03.599 going for as as broad a global coverage as we 0:05:03.640 --> 0:05:05.840 can get and for long term deals pick the p 0:05:05.920 --> 0:05:08.440 G E to where as an example, you know, we're 0:05:08.440 --> 0:05:11.560 we're in that business for twelve years. We've got all 0:05:11.600 --> 0:05:14.240 of the all of the world outside of the US, 0:05:14.279 --> 0:05:17.040 so that gives us time to really build out a 0:05:17.440 --> 0:05:20.520 global product without having to sort of chase rights renewals 0:05:20.560 --> 0:05:22.479 every two or three years. And one thing I also 0:05:22.520 --> 0:05:24.560 want to point out, and the Olympics may be the 0:05:24.600 --> 0:05:28.200 greatest example for that again long term deal. Uh, you know, 0:05:28.240 --> 0:05:30.800 eight years all of Europe, and we have a very 0:05:30.880 --> 0:05:34.560 unique ability to essentially orchestrate all kinds of different revenue 0:05:34.560 --> 0:05:36.839 streams to maximize the value of this I P that 0:05:36.880 --> 0:05:39.960 no one else has. Uh. In some markets we will 0:05:39.960 --> 0:05:42.760 sub license because there's public service broadcasters that with deep 0:05:42.760 --> 0:05:45.240 pockets that just paid crazy amounts for some of those rights. 0:05:45.240 --> 0:05:47.760 And others we have our own broadcast stations. Will you 0:05:47.760 --> 0:05:51.839 know we did more than viewership on on in Norway 0:05:51.839 --> 0:05:54.520 on some of the Winter Olympics events and in other 0:05:54.560 --> 0:05:57.120 markets you know, we'll we'll go in hard with our 0:05:57.160 --> 0:05:59.560 own O T T product on the mobile devices, etcetera. 0:05:59.640 --> 0:06:02.080 So so bottom line is we can slice and dies 0:06:02.200 --> 0:06:04.400 these these rights were in a gatekeeper position and can 0:06:04.400 --> 0:06:07.479 extract so much more value than many others could. Dr 0:06:07.520 --> 0:06:09.600 Gunnar vieden Felt, thank you so much for being with us. 0:06:10.400 --> 0:06:14.520 Dr Gunn viden Fels, I tried, I think it was, 0:06:14.640 --> 0:06:16.680 it was, it was. I mean, our producer did way 0:06:16.680 --> 0:06:19.760 better than I'm gonna Weeden Fells is chief financial officer 0:06:19.880 --> 0:06:23.720 of Discovery Communications, and I gotta say it is amazing 0:06:23.720 --> 0:06:41.200 the popularity of these shows. Yesterday was a bad day 0:06:41.240 --> 0:06:43.680 for risk acids in general, but it was a uniquely 0:06:43.880 --> 0:06:47.920 terrible day for emerging markets, in particular emerging market currencies. 0:06:48.080 --> 0:06:50.279 I'm looking right now at the ms c I Emerging 0:06:50.320 --> 0:06:52.880 Market Currency Index, which had its biggest plunge at one 0:06:52.880 --> 0:06:57.280 points two thousand thirteen. Here to explain what exactly investors 0:06:57.320 --> 0:06:59.679 are the most worried about right now, what they're pricing 0:06:59.680 --> 0:07:02.479 in his Eric Fine, but folio manager focused on emerging 0:07:02.520 --> 0:07:06.200 markets fixed income for van Eck Global, Eric, thank you 0:07:06.240 --> 0:07:08.919 so much for being with us. Let's start there, what 0:07:09.120 --> 0:07:12.520 our investors pricing in with this sell off? Sure? Thanks, 0:07:13.040 --> 0:07:14.760 great question, and I would phrase it as or I 0:07:14.760 --> 0:07:18.120 would my own response would be only beginning to price in? 0:07:18.280 --> 0:07:20.600 And I think, um, there are three big things that 0:07:20.640 --> 0:07:22.800 they're only beginning to price in that are big and 0:07:22.960 --> 0:07:26.400 they map to growth, not rates. I think everything is 0:07:26.440 --> 0:07:28.560 being fewed for the lens rate and not through the 0:07:28.600 --> 0:07:31.440 growth rate. And it's really important. What are they Number One, 0:07:31.480 --> 0:07:35.000 the FED, The USA is a relatively closed economy. If 0:07:35.000 --> 0:07:38.600 it's cutting rates because of issues in the big trading nations, 0:07:38.600 --> 0:07:41.600 Asia and Europe, how's that going to play out. It's 0:07:41.600 --> 0:07:43.680 probably going to play out where US growth ends up 0:07:43.720 --> 0:07:46.040 continuing to do couple and the rest of the world 0:07:46.040 --> 0:07:49.160 growth is weak. That is dollar bullus. That's what we 0:07:49.200 --> 0:07:51.280 saw in the first half of eighteen. That's what we've 0:07:51.320 --> 0:07:54.480 seen for big chunks of chunks of time. And when 0:07:54.520 --> 0:07:57.720 you look and let's let's say the ninety s basis 0:07:57.720 --> 0:08:00.760 points of cuts that are priced in happen or whatever reason, well, 0:08:00.760 --> 0:08:04.480 that's consistent with really weak growth numbers. That's also dollar bullush. 0:08:04.640 --> 0:08:07.080 All these countries that have been encouraged to issue dollar bonds, 0:08:07.120 --> 0:08:08.720 what are they going to do when they see see 0:08:08.720 --> 0:08:12.040 that they're gonna buy dollars first. So the FED context 0:08:12.080 --> 0:08:15.120 is really important. The perfect scenario, the Goldilocks scenarios were 0:08:15.120 --> 0:08:18.200 weak enough and the rest of the world is begins 0:08:18.240 --> 0:08:20.600 to grow just enough. I don't see evidence of it yet. 0:08:20.760 --> 0:08:24.160 China is rightly being very balanced Germany, no whole fiscal 0:08:24.200 --> 0:08:26.960 stimulus US. The elections too far away. So that's the 0:08:27.000 --> 0:08:29.360 big thing. That's number one, the number two, but it 0:08:29.360 --> 0:08:33.880 maps to grow the big picture ideas here are you 0:08:33.920 --> 0:08:38.280 think that necessary? The sell oft didn't go necessarily far enough. Um? 0:08:38.440 --> 0:08:42.240 I think that the market had this general view. Um 0:08:42.520 --> 0:08:44.680 I think that the market was pricing in a rate 0:08:44.679 --> 0:08:48.520 cutting cycle from the Fed. And it may not be, 0:08:48.880 --> 0:08:50.600 and it was pricing at a rate cutting cycle because 0:08:50.640 --> 0:08:53.679 it was too focused on global developments and on rates 0:08:53.840 --> 0:08:56.439 and not on what the Fed's narrow mandate is. Now. 0:08:56.600 --> 0:08:59.640 They may have bought some insurance, but we're relatively closed 0:08:59.640 --> 0:09:03.119 economy that's not as affected by these big negative developments 0:09:03.120 --> 0:09:06.200 that they are specifically citing. Just a good chance that 0:09:06.280 --> 0:09:08.320 we end up in a divergent scenario where the US 0:09:08.400 --> 0:09:12.160 is doing okay, rest of world isn't. And put put differently, 0:09:12.160 --> 0:09:13.920 what are they gonna hiking rates? What does that do 0:09:14.000 --> 0:09:16.600 for China trade? Sorry? Cutting rates? What does that do 0:09:16.679 --> 0:09:19.480 for that? Right? Right? Right? And and the dynamic is 0:09:19.559 --> 0:09:23.520 unusual because this on the second big issue, which is trade, 0:09:23.559 --> 0:09:27.960 is cutting rates If that's the response to what many 0:09:28.000 --> 0:09:31.600 think is bad trade policy, that encourages that, and the 0:09:31.600 --> 0:09:34.199 Hong Kong situation obviously encourages a harder line. So the 0:09:34.280 --> 0:09:37.080 dynamic so the FED is the context. Trade is the 0:09:37.120 --> 0:09:39.880 second pigure. I mentioned the third one. But you have 0:09:39.880 --> 0:09:43.000 a question, Well, let's just the news today or less 0:09:43.800 --> 0:09:46.720 four hours. UM, now that China has been named a 0:09:46.760 --> 0:09:50.240 currency manipulator? Do we care about that? Do emerging market 0:09:50.520 --> 0:09:53.480 care about that? Well? The facts are they care the 0:09:54.080 --> 0:09:56.600 pretty much every facts other than Lira where there's direct 0:09:56.640 --> 0:10:00.280 state intervention, most likely um cared, so they do care. UM. 0:10:00.320 --> 0:10:03.920 It's a bellweather currency, it's held UM so. I think 0:10:03.920 --> 0:10:06.160 there are two ways of answering it. The narrow way 0:10:06.400 --> 0:10:10.079 is no, what happens? I am a for issues of 0:10:10.160 --> 0:10:15.000 report UM. There are possible restrictions on OPEC. It's a state. 0:10:15.240 --> 0:10:18.560 US state agency can guarantee lending, UM limits its loans 0:10:18.640 --> 0:10:22.400 or a stop from very narrow symbolically though, it's it's 0:10:22.559 --> 0:10:27.400 it's uh, it's important. My broader question is who wants 0:10:27.640 --> 0:10:33.560 their currency stronger? Argentina other than Argentina. I could come 0:10:33.600 --> 0:10:35.280 up with a bunch, but yeah, but that kind of 0:10:35.280 --> 0:10:37.360 proves the point. But yeah, who wants their currency stronger? 0:10:37.400 --> 0:10:39.160 This is this is where the rubber hits the road, 0:10:39.400 --> 0:10:42.000 and this is where traditionally what's the central This gets 0:10:42.000 --> 0:10:43.640 to the level of central marks what center are going 0:10:43.679 --> 0:10:47.959 to do by foreign currency denominated assets of another country. Okay, 0:10:48.080 --> 0:10:50.960 so you buy emerging markets fixed income for a living, 0:10:51.000 --> 0:10:53.720 and you're coming in here expressing a lot of concern 0:10:53.760 --> 0:10:55.800 about the entirety of an asset class. So what are 0:10:55.840 --> 0:10:58.120 you buying? Yes, great question, Great way, friend. What I 0:10:58.160 --> 0:11:01.679 always tell people is if when if your choices for 0:11:01.720 --> 0:11:04.520 emerging markets boiled down to you waking up in the 0:11:04.520 --> 0:11:07.760 morning and thinking about President she and Trump and the FED, 0:11:08.240 --> 0:11:11.880 then that's an issue. Um Why because there are categories 0:11:11.920 --> 0:11:14.600 of I M bonds that are vulnerable to that. There's 0:11:14.640 --> 0:11:17.920 a big chunk that are low yielding Polish government bonds 0:11:17.920 --> 0:11:20.280 and local currency at two percent, Chinese government bonds at 0:11:21.320 --> 0:11:25.480 Mexico in dollars at three and a half, Russia. No, 0:11:25.720 --> 0:11:29.240 I'm saying those are the ones where if we're correct 0:11:29.360 --> 0:11:31.680 and on one of the two big scenarios that the 0:11:31.760 --> 0:11:34.680 FED is not on an easy cycle and that there's 0:11:34.760 --> 0:11:37.720 upside risk to yield, those are that's a whole category 0:11:37.800 --> 0:11:40.600 VM depth that's very vulnerable. It's over a third. Then 0:11:40.640 --> 0:11:46.200 there's another category that is vulnerable UM to rising spread duration, 0:11:46.520 --> 0:11:49.280 let's say, because because there's risk that the FED is 0:11:49.440 --> 0:11:51.000 growing but the rest of the world is doing poorly, 0:11:51.520 --> 0:11:54.319 so they're not doing any better. Rates are going higher, 0:11:54.520 --> 0:11:57.160 so you better be darn sure that your spread is 0:11:57.160 --> 0:11:59.600 coming down for idiosyncratic reasons. And there are a lot 0:11:59.640 --> 0:12:02.040 of country treas that don't fit nicely in that world. 0:12:02.040 --> 0:12:05.200 I put scom in South Africa, UM, I'd even put 0:12:05.280 --> 0:12:07.959 Mexico um the sovereign and then although that's also got 0:12:07.960 --> 0:12:11.600 a low yield problem. Those so those categories are the 0:12:11.640 --> 0:12:14.200 vulnerable ones. Those are big parts of what people think 0:12:14.200 --> 0:12:17.679 of as emerging markets. However, there is a large category 0:12:17.960 --> 0:12:21.440 that's very idiosyncratic and that has strong reformist governments. They 0:12:21.480 --> 0:12:25.640 are paying high yields Ukraine. I've been looking at Ukraine 0:12:25.640 --> 0:12:27.600 for over two decades. I have never seen a more 0:12:27.600 --> 0:12:30.920 reformist government has likely to have I m F support 0:12:31.559 --> 0:12:36.240 eight percent yields. Brazil much lower yields, very reformist government, 0:12:36.400 --> 0:12:38.160 but it's a net credit or doesn't mean that there 0:12:38.160 --> 0:12:41.240 aren't problems in Brazil. They mapped to the currency, but 0:12:41.640 --> 0:12:45.840 dollar denominated long dated bonds of petrobrass at five percent yields, 0:12:45.880 --> 0:12:49.800 that's attractive that can respond to this environment. So if 0:12:49.840 --> 0:12:52.920 your general answers, so if my broadest answers, it's about 0:12:52.920 --> 0:12:56.200 growth not rates. And my narrow answer is if what 0:12:56.320 --> 0:12:58.240 E M means to you is waking up in the 0:12:58.280 --> 0:13:01.120 morning and thinking about j Pal and the presidents of 0:13:01.200 --> 0:13:06.080 China and Russia. Sorry, President US, be cautious, right. There 0:13:06.080 --> 0:13:07.640 are a lot of things that are issues, but if 0:13:07.679 --> 0:13:09.520 you can be selective, there are a lot of great 0:13:09.559 --> 0:13:12.800 things in EM and the bottom the biggest context is 0:13:13.040 --> 0:13:16.000 the efficient frontier based on fifteen years of history, says 0:13:16.040 --> 0:13:19.280 the best category of EM bonds including all categories, were 0:13:19.320 --> 0:13:22.520 from treasuries to global act of corporates. People are under 0:13:22.559 --> 0:13:26.280 invested in EM generally if it means piling into generic stuff, 0:13:26.400 --> 0:13:28.199 I just told you my answer. But if you can 0:13:28.240 --> 0:13:30.040 be tactical and find the right way to express it, 0:13:30.080 --> 0:13:32.480 there are plenty of opportunities in EM. Eric Fine, thank 0:13:32.520 --> 0:13:35.560 you so much for joining us. Eric Fine, portfolio manager 0:13:35.720 --> 0:13:38.440 covers all thing emerging markets fixed income strategy for van 0:13:38.520 --> 0:13:41.800 Neck Global. Joining us here in our Bloomberg Interactive Broker studio, 0:13:56.400 --> 0:13:59.400 Let's bring in Paul Gates senior research analysts focus on 0:13:59.440 --> 0:14:03.800 European medals and mining to uh, to really understand what's 0:14:03.920 --> 0:14:06.160 driving the declines that we've seen in metals. Is this 0:14:06.320 --> 0:14:11.480 just concerned about escalating trade wars? Um, Hi, good oftening, 0:14:11.520 --> 0:14:14.360 good morning. Look you know in in in the short end, 0:14:14.480 --> 0:14:16.000 the answer to that is yes. I mean clearly what 0:14:16.040 --> 0:14:18.520 we've seen over the last you know, over the last 0:14:18.559 --> 0:14:21.800 few days is uh. You know, copper respond to the 0:14:21.840 --> 0:14:24.440 sort of macro the risk off sort of trade, right, um, 0:14:24.480 --> 0:14:26.840 And your sort of point about dr copper. People use 0:14:26.920 --> 0:14:30.080 the copper rice, you know, for for whatever reason to articulate, 0:14:30.440 --> 0:14:33.920 you know, a view that they have around around around 0:14:33.920 --> 0:14:36.400 global growth. It's liquid, it's easier to trade. You know, 0:14:36.440 --> 0:14:39.960 people can get into and out of it fairly, fairly easily. However, 0:14:40.080 --> 0:14:41.840 I mean, I think the other point, however, you've got 0:14:41.840 --> 0:14:43.440 to sort of look at, however, is if you were 0:14:43.440 --> 0:14:46.400 to look beyond copper. So let's say another elemy traded 0:14:46.440 --> 0:14:49.320 commodity like nickel that's actually up today, that's been on 0:14:49.320 --> 0:14:51.320 a bit of a bull run for the last for 0:14:51.320 --> 0:14:54.480 the last few months, and that sort of defined you know, 0:14:54.600 --> 0:14:57.680 the negativity around the sort of macros endment to actually 0:14:57.680 --> 0:15:00.440 post some pretty significant gains. So what we're sort of 0:15:00.440 --> 0:15:02.840 seeing in these commodities is something of a mixed back. 0:15:03.160 --> 0:15:07.920 You know, the the economic fundamentals eventually will trump essentially 0:15:08.320 --> 0:15:12.320 or overtake the risk offs, you know, trade and the 0:15:12.400 --> 0:15:15.720 risk off sentiment, and you'll actually see supply demand fundamental 0:15:15.760 --> 0:15:18.000 start to matter. But in the immediate short term for 0:15:18.040 --> 0:15:20.960 a commodity like copper, there's no immediate deficit, and so 0:15:21.000 --> 0:15:23.040 people are using it as a proxy for global trade. 0:15:23.600 --> 0:15:26.600 We're speaking with Paul Gates, senior research analysts for Sanford Burns, 0:15:27.040 --> 0:15:29.600 calling in from London. Paul, thanks so much again for 0:15:29.680 --> 0:15:32.800 joining us. Just wondering kind of as we think about copper, 0:15:33.120 --> 0:15:35.320 give us a sense of the supply and demand model 0:15:35.360 --> 0:15:37.080 that you see playing out here. I'm just looking at 0:15:37.080 --> 0:15:39.640 the charts. Lisa mentioned kind of an ugly chart, but 0:15:39.720 --> 0:15:42.920 what's your sense on the supplied demand dynamics for that metal. 0:15:43.880 --> 0:15:45.360 I mean, if you actually look at the sort of 0:15:45.360 --> 0:15:47.760 fundamentals and you say, look, you know, supply demand as 0:15:47.800 --> 0:15:49.640 you as you talk to what you see at the 0:15:49.680 --> 0:15:51.720 moment is a market that's actually in deficit, not a 0:15:51.800 --> 0:15:54.960 huge deficit, but slight deficit. Moreover, if you're to look at, 0:15:55.000 --> 0:15:57.840 for example, the position of the lem me say, for example, 0:15:57.920 --> 0:16:00.440 terminal market inventories. If you look at them of metal 0:16:00.480 --> 0:16:03.760 that's available on either you know, LM, Shanghai, COMEX, you 0:16:03.760 --> 0:16:06.680 know you're dealing with very very little metal actually available. 0:16:06.760 --> 0:16:09.840 Only about six or seven days worth of infantry is 0:16:10.160 --> 0:16:14.160 actually sort of there. So from the fundamental supply demand perspective, 0:16:14.400 --> 0:16:16.400 the industry is actually sort of looking pretty you know, 0:16:16.480 --> 0:16:19.440 pretty pretty healthy. Moreover, if you would have rolled this 0:16:19.640 --> 0:16:22.720 forward a few years, what you start to see as 0:16:22.760 --> 0:16:26.680 an industry whose fundamentals tightened up dramatically today's kind of 0:16:26.760 --> 0:16:29.840 copper price, it's very very difficult to invest in any 0:16:29.880 --> 0:16:32.800 new form of supply. It's uneconomic to build a new 0:16:32.840 --> 0:16:35.520 copper mind certainly on economic if what you're aiming for 0:16:35.840 --> 0:16:38.080 is one of these larger, more complex or bodies that 0:16:38.120 --> 0:16:40.920 have been developed over the you know, over the last 0:16:40.920 --> 0:16:44.120 few years. So really there isn't any supply growth. Demand 0:16:44.200 --> 0:16:47.040 growth continues to track, you know, at least in a 0:16:47.080 --> 0:16:49.320 trend sense, what it's always done, which is to sort 0:16:49.320 --> 0:16:52.840 of you know, follow global industrial production. So you roll 0:16:52.920 --> 0:16:54.880 this out a few years and it's you know, almost 0:16:54.920 --> 0:16:57.520 inevitable that we're going to see the copper price rally 0:16:57.600 --> 0:17:00.880 from rally from here. However, of course the immediate short 0:17:00.960 --> 0:17:04.000 term people aren't interested in, you know, the fundamentals. All 0:17:04.040 --> 0:17:07.320 they're interested in is the ability to articulate a negative 0:17:07.400 --> 0:17:09.520 view on for example, you know, the the R and 0:17:09.560 --> 0:17:13.600 B Chinese growth uh and and trade sentiment and the 0:17:13.680 --> 0:17:16.760 copper prices a convenient means by which they can do so. Paul, 0:17:17.119 --> 0:17:19.640 really quick, thirty seconds here, which medal are you most 0:17:19.640 --> 0:17:23.320 bullish on? Then over the next six months, Over the 0:17:23.359 --> 0:17:25.440 next six months would certainly be bullish on copy. We'd 0:17:25.480 --> 0:17:27.880 expect to see her recovery there. I think going into 0:17:27.960 --> 0:17:30.760 the going into the seasonal trade at the end of 0:17:30.760 --> 0:17:32.439 the year, there's a case to be made, you know, 0:17:32.480 --> 0:17:34.680 even for a commodity like iron are that has had 0:17:34.720 --> 0:17:37.200 something of you know, had a very dramatic sort of 0:17:37.240 --> 0:17:40.720 bull run. We also continue to be supportive for commodity 0:17:40.760 --> 0:17:43.640 like nickel and something like palladium as well. Paul Gay, 0:17:43.680 --> 0:17:45.639 thank you so much for joining us Paul Gate as 0:17:45.640 --> 0:17:48.679 a senior research channels covering European medals and mining for 0:17:48.800 --> 0:18:05.479 Sanford Bernstein based in London. We appreciate your comment if 0:18:05.560 --> 0:18:08.400 we talk fixed income. We talked to Ira Jersey, chief 0:18:08.480 --> 0:18:11.840 US interest rate strategist for Bloomberg Intelligence, we should start 0:18:11.880 --> 0:18:15.840 with yields that touch the lowest in the US yesterday 0:18:15.880 --> 0:18:18.160 all the price action. I want to start a little 0:18:18.160 --> 0:18:20.440 bit differently though, because we got that op ed in 0:18:20.480 --> 0:18:23.639 the Wall Street Journal of former FED chairs saying that 0:18:23.680 --> 0:18:26.520 it was really important to have an independent FED. Meanwhile, 0:18:26.840 --> 0:18:29.480 James Bullard spoke to the a f P. He's a St. 0:18:29.520 --> 0:18:32.119 Louis FED president, and he said that the FED has 0:18:32.200 --> 0:18:35.560 to avoid uh sort of responding in with rate cuts 0:18:35.600 --> 0:18:38.440 every time there's a tit for tat in the trade war. 0:18:38.800 --> 0:18:42.359 This seems to indicate there's a pushback to the assumption 0:18:42.400 --> 0:18:44.919 in markets that the FED will respond with deeper cuts 0:18:45.080 --> 0:18:47.640 to the trade uncertainty. Ira, what's your take on this? Yeah, 0:18:47.680 --> 0:18:50.600 I think that James Bullard is probably the first of 0:18:51.040 --> 0:18:52.840 probably a few FED speakers that are going to come 0:18:52.880 --> 0:18:54.840 out over the next couple of weeks and talk about 0:18:55.240 --> 0:18:57.920 that we're looking at the real economy and we're looking at, 0:18:57.960 --> 0:19:01.320 you know, how trade and trade tensions might impact the 0:19:01.359 --> 0:19:03.520 real economy going forward, and that's what we're going to 0:19:03.600 --> 0:19:06.800 react to we're not reacting to headlines, were not reacting 0:19:06.840 --> 0:19:09.760 to tweets. We're going to react more to the kind 0:19:09.760 --> 0:19:11.480 of the the boots on the ground and the normal 0:19:11.520 --> 0:19:13.040 things that they look at. And I think that the 0:19:13.160 --> 0:19:16.960 cut that occurred in July was in part um that 0:19:17.119 --> 0:19:19.640 they had the ammunition because there was increased in certainty 0:19:19.640 --> 0:19:23.320 about the economic outlook. There is slowing global growth and 0:19:23.359 --> 0:19:25.680 when you look at some survey indicators like I s 0:19:25.800 --> 0:19:29.199 M new orders, they're teetering on the edge of growth 0:19:29.240 --> 0:19:32.399 actually going negative. So um, so that's something that the 0:19:32.400 --> 0:19:34.240 FED wants again in front of. So you know, the 0:19:34.240 --> 0:19:37.440 other thing that he said that that President Bullard mentioned 0:19:37.520 --> 0:19:39.520 was he's going to be looking at incoming data. So 0:19:39.560 --> 0:19:43.360 it's really about data and then data expectations regardless of 0:19:43.840 --> 0:19:46.600 you know, what either the president wants or maybe what 0:19:46.680 --> 0:19:49.720 even what the markets expecting. So I I'm looking at 0:19:49.720 --> 0:19:52.920 the tenure treasury right now one point seven five, one 0:19:52.920 --> 0:19:55.760 point seven six, and I know that they and when 0:19:55.760 --> 0:19:57.800 I look at the futures, the markets pricing in three, 0:19:58.119 --> 0:20:01.200 I guess more more likely four rap cuts going forward. 0:20:01.240 --> 0:20:04.720 What is the market seeing that perhaps the feed is 0:20:04.760 --> 0:20:07.000 not and maybe some observers are not seeing as it 0:20:07.040 --> 0:20:09.399 relates the economy. Well, yeah, yeah, I think that the 0:20:09.440 --> 0:20:14.840 market really is looking forward to additional and firstly uncertainty, 0:20:14.840 --> 0:20:17.320 but also much slower growth and also you know, kind 0:20:17.359 --> 0:20:21.359 of easier, easier monetary policy globally, So the idea that 0:20:21.440 --> 0:20:25.720 the ECB might be starting a new round of quantitative easing, 0:20:25.840 --> 0:20:28.000 so a lot of a lot more asset purchases, as 0:20:28.040 --> 0:20:31.879 well as maybe another deposit rate cut in September. So 0:20:31.960 --> 0:20:33.720 all of those things I think are weighing on on 0:20:33.760 --> 0:20:36.439 the market. So the market was pricing in for another 0:20:36.680 --> 0:20:39.440 for basically what we are now about a month ago, 0:20:39.520 --> 0:20:41.760 and then things kind of got better, at least from 0:20:41.760 --> 0:20:44.840